Obama administration lifts veil off hospital pricing

Health reform • The facilities' fees are lower than national average, but prices within the state vary widely.

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Federal officials today, for the first time, lifted the veil off hospital pricing.

You wouldn't buy a loaf of bread or car without comparing prices, or hire a plumber or landscaper without accepting bids. But the prices charged by hospitals have been a closely held industry secret.

Today the U.S. Department of Health and Human Services (HHS) published data revealing what hospitals across the country charged in fiscal year 2011 for some of Medicare's most common inpatient procedures, from joint replacements to treatment for pneumonia and kidney failure.

The data set, available online, isn't easily searchable and does not include physician fees.

But it shows how widely varied and seemingly arbitrary hospital charges can be, say federal officials.

"When consumers can easily compare the price of goods and services, producers have a strong incentive to keep prices low," said HHS Secretary Kathleen Sebelius at a press conference on Wednesday. "Hospitals that charge two or three times the going rate will rightfully face scrutiny, and those that charge lower rates may gain more customers."

Experts question the value of this information to insured consumers, because the charges are largely fictitious hospital "rack rates," or starting points for public and private insurers to negotiate discounts.

"The problem in health care is people don't tend to pay their own bills. About 88 percent of medical bills are paid for by third parties; Medicaid, Medicare or insurance companies," said health care policy analyst and economist Devon Herrick. "So 90 percent of us care only about one-tenth as much about what the price is. And you don't have doctors and hospitals competing for patients on price."

The data, however, might be useful tothe uninsured and underinsured, who are more vulnerable to paying these master prices because they lack bargaining power, said Herrick, who works at the Dallas-based National Center for Policy Analysis.

"If you're paying cash, I advise consumers to negotiate the price," said Herrick. "A lot of people don't know you can shop around. It's a big pain â¦ but it's well worth the effort."

Over time, pricing transparency may also have a sort of "shaming" effect on providers, who will have an increasingly tough time answering questions about disparities from consumers. Studies have shown that when consumers are exposed to data on higher prices, they reduced their use of medical care by about 40 percent, Herrick said.

"If you're in the ambulance on the way to the emergency room, you're not going to call around and see who has the best rates," he said. "But if your doctor orders a CT scan or a lab test, and you find out that you can maybe get it somewhere cheaper, we know that a lot of people will get on the phone and call around."

Price disparities are pronounced.

Average inpatient charges for a joint replacement, for example, range from a low of $5,300 at a hospital in Ada, Okla., to a high of $223,000 at a hospital in Monterey Park, Calif.

Even within Utah there are price gaps, an analysis by The Salt Lake Tribune shows.

In Utah, the average charge to treat heart failure ranges from a low of $7,756 at Uintah Basin Medical Center in rural Roosevelt to a high of $21,638 at the state's busiest hospital, Intermountain Medical Center in Murray.

For-profit health centers generally charge the most, even those in economically depressed areas of the state. Ashley Valley Medical Center in Vernal, owned by LifePoint Hospitals, posts the highest average charge for joint replacements, $50,185  more than 10 times the price Medicare pays on average in Utah.

Uintah Basin Medical Center, the state's only county-owned hospital, charges $26,942 on average for joint replacements. It also boasts the lowest charges for heart failure and pneumonia treatment.

University Hospital, the state's only academic medical center, also charges comparatively lower rates across the board.

Utah hospitals did not respond to requests to explain their charges.

It could be worse. Consider the gap in heart failure care charges in Jackson, Miss., which range from $9,000 to $51,000.

Prices in Utah are well below the national average, but they aren't the absolute lowest, which is notable considering Utah has the lowest per-capita health care spending in the country.

"We see no logical business argument for why there's so much variation," said Jonathan Blum, director of the Centers for Medicare & Medicaid Services.

His agency is spending millions on grants to states willing to collect, analyze and publish health pricing data in a consumer-friendly way.

Hospitals argue their prices reflect regional differences in overhead costs or the complexity of patients they serve, said Blum, who said research is needed to prove that. Prices don't appear to reflect the quality of care provided, he added.

The United States spends more per capita on health care than any developed nation but isn't healthier for it. American hospitals outperform their international peers on some health measures, such as breast and colorectal cancer survival rates, according to an analysis by the Commonwealth Fund.

But it has among the highest rates of potentially preventable deaths from asthma and amputations due to diabetes, and rates that are no better than average for in-hospital deaths from heart attack and stroke, the group found.

The online Utah Price Point system uses data from annual hospital discharge reports required by state law. Price point compares the "charge master" price points for individual hospitals against average payments made by public and private insurers.

Comparisons can be made between hospitals in the same county, statewide or across regions of the state. The data includes information on the 10 most common types of hospitalization and treatments and other illnesses and procedures.

Price Point data is collected and distributed through a partnership between the Utah Hospital Association and the Utah Department of Health. Consumers can access the data online at http://www.utpricepoint.org/

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